Wind Turbine Feasibility Study for Jiminy Peak Resorts

Executive Summary

The cost of kilowatt per hour significantly increased by 50% this season, therefore, the management of Jiminy Peak realized the incentives to adapt a sustainable energy reduction system in order to decrease costs as well as well preserving the environment. This report provides evidence that the wind turbine is a proper solution to this problem.

Introduction

Despite the practices that were implemented in the past to make energy usage more efficient, such as dim lights, the management of Jiminy Peak resort is really concerned about the increase in electricity cost. Since the resort is on top of the mountain where it’s usually very windy, the company's CEO decided to study the feasibility of using wind turbines as a source of energy in order to reduce costs and make the resort more sustainable. In this report, our team prepares a feasibility study that would recommend installing the wind turbine because it will lead to significant financial benefits for the resort. In the first section, we identify the costs, savings, and annual cash flows related to the project during it useful life. In the second section, we prepare capital budgeting analysis using the payback period and the net present value methods. In the final section of the study, we identify any environmental or social factors that could positively or negatively affect the project. A memo addressed to Mr. Brian Fairbank recommending proceeding with the wind turbine project concludes the study.

I. Costs, Savings, and Annual Cash Flows

➢ Costs to account for:

The costs related to the wind turbine project include, but not limited to, the initial purchase and installation costs of $3,900,000, SED’s feasibility study fees of $157,000, as well as $75,000 annual repairing and maintenance cost. The company is also obligated to pay 40% tax of the income generated by the wind turbine. Moreover, the investment qualifies for MACRS (Modified Accelerated Cost Recovery System) double-declining...